The Risk Of Continuing Gold Backwardation
from Gold Silver Worlds:
We came across an interesting article published by renowned Prof. Fekete. In the article he elaborates the current backwardation in the gold markets and explains what effects a prolonged and continuing backwardation could have not only on the gold markets, but on the economy as a whole. We would like to quote two sections from his paper, to give you a taste of the effects this could have:
But no sooner had gold futures trading stopped after the advent of permanent backwardation than gold was no longer to be had in exchange for U.S. Treasury debt. The entire outstanding debt of the U.S. was worth not one ounce of gold. Not one gram of it. It is insane to pretend that this would make no difference in world trade, as pretended by official doctrine.
In fact, delivery of gold will be suspended under the force majeure clause. Short positions will have to be settled in cash, to be made available by the Fed’s printing presses. Gold futures trading will be a thing of the past.
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